Dyer-Rossi v. Hall

Opinion

1 This memorandum opinion was not selected for publication in the New Mexico Reports. Please 2 see Rule 12-405 NMRA for restrictions on the citation of unpublished memorandum opinions. 3 Please also note that this electronic memorandum opinion may contain computer-generated 4 errors or other deviations from the official paper version filed by the Court of Appeals and does 5 not include the filing date. 6 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

7 DYER-ROSSI, L.L.C., 8 Plaintiff-Appellant/Cross-Appellee, 9 v. NO. 29,429 10 CHERYL HALL, 11 Defendant-Appellee/Cross-Appellant.

12 APPEAL FROM THE DISTRICT COURT OF LINCOLN COUNTY 13 Karen L. Parsons, District Judge

14 Adam D. Rafkin, P.C. 15 Adam D. Rafkin 16 Ruidoso, NM

17 for Appellant/Cross-Appellee

18 Richard A. Hawthorne, P.A. 19 Richard A. Hawthorne 20 Ruidoso, NM

21 for Appellee/Cross-Appellant

22 MEMORANDUM OPINION 23 KENNEDY, Judge.

1 Following the termination of a contract for the sale of land, Dyer-Rossi, L.L.C. 2 (Buyer) sued Cheryl Hall (Seller) for reimbursement of its earnest money. Both 3 parties requested, but were denied, attorney’s fees. Buyer appeals, maintaining that 4 because it was the prevailing party, it is entitled to attorney’s fees. Seller cross- 5 appeals, asserting error in the district court’s determination that she breached the 6 contract. For the reasons below, we affirm the district court. 7 I. BACKGROUND 8 Buyer and Seller signed a Purchase Agreement (Agreement) for a parcel of 9 land. Buyer provided Seller with $25,000 that was contractually described as “Earnest 10 Money” which was refundable if the contract terminated. Yet, the earnest money was 11 referred to as a “non[-]refundable deposit” in Addendum No. 1 (Addendum) executed 12 by the parties on the same day. The closing date was set six months to the day after 13 the contract was signed. The Addendum further obligated “[Buyer] to pay Seller” an 14 additional “$1,000[] per month for a period of [six] months.” The Agreement stated 15 that the earnest money would be escrowed and “applied to Purchase Price and/or 16 closing costs upon Funding Date.” The Agreement also stated that “Seller will not 17 receive the proceeds of sale until all the events stated under ‘Funding Date’ have been 18 completed.” The final page of the Agreement listed the same broker as representing 19 both Seller and Buyer.

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1 The deal subsequently fell apart as described below. Buyer sued Seller to return 2 $27,000, representing the earnest money and two monthly payments that had been 3 tendered to Seller. From the district court’s findings, Buyer tendered $25,000 and two 4 $1,000 payments to the escrow agent with instructions to pay the money to Seller. 5 Meanwhile, Buyer had requested a zoning change for the property that was turned 6 down. At that time, Buyer considered asking for recission or reformation of the 7 contract. Subsequently, Buyer tendered another $1,000 as required by the Addendum, 8 but instructed the escrow agent not to give it to Seller. 9 When the payment did not come as expected, Seller contacted the broker on the 10 transaction, who told Seller that she would “take care of it.” The broker was aware, 11 but did not communicate to Seller, that the check had been tendered to and was being 12 held by the escrow agent. The broker contacted an attorney, who wrote a letter to 13 Buyer, stating that he represented the broker and her agency, and Seller considered the 14 contract terminated. Seller saw the letter and never contradicted its contents. The 15 following month, Buyer tendered another $1,000 to the escrow agent, again 16 instructing that it be held and not tendered to Seller. Seller did not ever contact Buyer 17 or the escrow agent to ascertain the status of the payments. Acting on the advice of 18 the broker and the broker’s lawyer, Seller locked the gate to the property. Buyer 19 thereafter sent a letter by his own attorney advising the broker’s attorney that Buyer

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1 was entitled to reformation or recission of the contract as a result of a mutual mistake. 2 month later, Seller retained her own attorney, who advised Buyer that Seller was 3 declaring the contract terminated due to Buyer’s breach and repudiation. Seller 4 eventually sold the property to another buyer. 5 The district court found that Seller terminated the contract by way of the 6 broker’s attorney’s letter. The court also determined that Seller had at the time 7 erroneously believed that Buyer never tendered the payments and had Seller known 8 that payments were tendered, she would not have sought to terminate the contract. 9 The court found a “technical breach” to have resulted from Seller’s actions, even 10 though Seller subjectively believed the letters sent to Buyer “simply demanded 11 payment,” and she did not know two payments were sitting at the escrow agent’s 12 office. In addition, none of the correspondence between the broker’s lawyer and 13 Buyer’s lawyer had been sent to the escrow agent. Neither Seller, nor anyone acting 14 on her behalf, ever demanded Buyer to cure the lack of payment. 15 Following a bench trial, the district court concluded that Seller’s termination 16 of the Agreement constituted enough of a breach of the contract to allow recovery of 17 a “non-refundable deposit.” The court awarded Buyer $27,000. In addition, it 18 determined that awarding attorney’s fees would be inequitable.

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1 The district court enunciated three reasons for denying attorney’s fees. First, 2 the district court found that the most egregious claims against Seller were claims for 3 misrepresentation, which had been dismissed by Buyer on the first day of trial. The 4 only claim remaining against Seller was for return of the money Buyer had paid. The 5 district court held that Buyer was entitled to the return of its $27,000 and declared that 6 the Agreement was rescinded. The district court concluded specifically that Buyer 7 had prevailed on its claim for recovery of its payments, but had not prevailed on its 8 claims for reformation, recission, or misrepresentation by Seller. Because Buyer 9 abandoned these claims on the first day of trial after Seller prepared her defense for 10 such claims, the district court found that it would be inequitable to award attorney’s 11 fees. 12 Second, the court determined that the contract was ambiguous as to whether the 13 $25,000 was a non-refundable deposit or earnest money and whether the monthly 14 $1,000 payments were to be escrowed or paid directly to Seller. But for the ambiguity 15 of payment terms and the failure of the broker to provide Seller with complete 16 information, Seller would not have terminated the contract had she been aware that 17 payments had been made. Hence, the court found again that equity prevented the 18 award to Buyer of attorney’s fees.

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1 Lastly, the district court determined that the contract language regarding the 2 deposit and monthly payments was ambiguous. Because this language was at issue 3 in determining whether there was a breach, the court decided that it would be 4 inequitable to award attorney’s fees on this basis as well. 5 Buyer now appeals the district court’s refusal to award attorney’s fees. Seller 6 appeals the court’s determination that Seller breached the contract and the court’s 7 award of $27,000 to Buyer. 8 II. DISCUSSION 9 A. Attorney’s Fees Were Properly Denied 10 We find no fault with the district court’s employment of equitable principles 11 in denying attorney’s fees. “The decision whether to grant or deny a request for 12 attorney fees rests within the sound discretion of the district court.” Garcia v. 13 Jeantette, 2004-NMCA-004, ¶ 15, 134 N.M. 776, 82 P.3d 947. Similarly, we review 14 only for an abuse of discretion when a district court uses its equitable powers to 15 provide an appropriate remedy. United Props. Co. v. Walgreen Props., Inc., 16 2003-NMCA-140, ¶ 7, 134 N.M. 725, 82 P.3d 535; Jones v. Schoellkopf, 17 2005-NMCA-124, ¶ 24, 138 N.M. 477, 122 P.3d 844. “An abuse of discretion occurs 18 if the decision is against the logic and effect of the facts and circumstances of the

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1 case.” Garcia, 2004-NMCA-004, ¶ 15 (internal quotation marks and citation 2 omitted). 3 Buyer argues that because it was the prevailing party and the contract at issue 4 “explicitly provided for attorney’s fees to be awarded to the prevailing party,” it 5 should have been awarded attorney’s fees. We agree that the contract had a fee 6 shifting provision and that Buyer prevailed in obtaining a $27,000 judgment against 7 Seller for breach of contract. Nonetheless, the court did not abuse its discretion in 8 denying attorney’s fees to Buyer. 9 First, it appears to have been Buyer’s intention to terminate the contract, even 10 though Seller technically breached the contract first. Once Buyer learned that the 11 government denied its petition to alter the parcel’s zoning, Buyer ordered the escrow 12 company to withhold the $1,000 monthly payments from Seller. The evidence 13 demonstrated that it was Buyer’s general intention to leave the contract when the 14 zoning change was denied, as denial of the zoning petition was contemporaneous with 15 its order to hold the checks. Nonetheless, Seller technically breached first due to a 16 miscommunication by the broker about Buyer’s failure to make payments. It would 17 not be in the interest of equity to reward Buyer attorney’s fees when Buyer’s actions 18 indicated that it wanted out of the contract and would potentially terminate it despite 19 Seller’s actions.

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1 In addition, Buyer, without notice to Seller or the court, abandoned its two most 2 egregious claims against Seller just before trial began. As such, Buyer compelled 3 Seller to answer to and prepare for trial against these claims prior to Buyer 4 abandoning them. Awarding attorney’s fees to Buyer after it compelled Seller to 5 expend the resources to answer abandoned claims would be inequitable. 6 Moreover, the contract was ambiguous as to whether the deposit was non- 7 refundable or refundable earnest money and whether payments were to be held until 8 closing or to be paid as due under the Addendum. Both Buyer and Seller had 9 persuasive arguments for interpreting the Agreement and Addendum in different 10 ways. As interpretation of this language was at issue in determining who breached 11 first, and it is clear that neither party acted maliciously, it would be inequitable to 12 punish one party by ordering it to pay the attorney’s fees in this case. 13 Thus, in light of the technical breach occasioned by the lack of transparency on 14 the part of the broker with no intent to breach on Seller’s part, the fact that Buyer 15 compelled Seller to superfluously expend resources on litigation, and the ambiguity 16 of the terms of the contract that led to the breach, we hold that the refusal to award 17 attorney’s fees was equitable. The district court did not abuse its discretion in denying 18 them.

19 B. Substantial Evidence Supports the District Court’s Decision to Find for 20 Buyer on the Breach of Contract Issue

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1 In her cross-appeal, Seller contends that substantial evidence does not support 2 the district court’s determination that Seller breached the contract. In reviewing 3 Seller’s challenge of the district court’s conclusion, “the standard for review is 4 whether the law correctly was applied to the facts, viewing them in a manner most 5 favorable to the prevailing party, indulging all reasonable inferences in support of the 6 court’s decision, and disregarding all inferences or evidence to the contrary.” Golden 7 Cone Concepts, Inc. v. Villa Linda Mall, Ltd., 113 N.M. 9, 12, 820 P.2d 1323, 1326 8 (1991). 9 We hold that the district court’s conclusion that the breach of the contract 10 occurred when the broker’s attorney informed Buyer that the contract was terminated 11 is supported by substantial evidence, and we affirm the district court’s conclusion that 12 Seller breached the contract. Despite evidence concerning Buyer’s withholding 13 checks from Seller, we do not reweigh the evidence, rather we determine that there is 14 substantial evidence in the record to support the decision of the district court. Regents 15 of Univ. of Cal. v. N.M. Water Quality Control Comm’n, 2004-NMCA-073, ¶ 29, 136 16 N.M. 45, 94 P.3d 788. 17 The evidence before us demonstrates that Seller (1) was aware of a problem 18 regarding Buyer’s payments, (2) failed to contact her escrow agent and inquire about 19 the status of payments, (3) locked Buyer out of the property, and (4) proceeded to

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1 terminate the contract through a letter from the broker’s attorney. Seller was aware 2 of the content of this letter, did not object to it, and did not claim that the attorney had 3 no authority to write it on her behalf. Furthermore, the letter explicitly stated that the 4 contract was terminated. 5 Thus, the district court’s judgment was supported by substantial evidence, as 6 there is ample support for the conclusion that Seller breached the contract through the 7 termination letter. We therefore affirm the judgment of the district court. 8 III. CONCLUSION 9 The district court used sound discretion in applying equitable principles to this 10 case and in determining when and by whom the contract was breached. Consequently, 11 we affirm the district court. 12 IT IS SO ORDERED.

13 _______________________________ 14 RODERICK T. KENNEDY, Judge

15 WE CONCUR:

16 _________________________ 17 MICHAEL E. VIGIL, Judge

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1 _________________________ 2 LINDA M. VANZI, Judge